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Abstract:

Methods and corresponding systems are provided for providing and
administering deferred annuities with an annuity reset feature that
provide periodic income payments to an annuitant for a term beginning at
a start date. The methods include the step or steps of: receiving annuity
information for an annuitant; determining at a first date one of a
purchase price and an amount of at least one income payment due to the
annuitant at the start date. The purchase price or the amount of at least
one income payment due the annuitant includes a fee for the annuity reset
feature that resets at least one variable of the annuity at a reset date
later than the first date if the at least one variable of the annuity at
the reset date is more beneficial to the annuitant than at least the
first date; and offering the annuity with the reset feature to the
annuitant.

Claims:

1. A method for providing a deferred annuity comprising: receiving
annuity information for an annuitant, the annuity providing periodic
income payments to the annuitant for a term beginning at a start date;
determining at a first date, with a computing device, one of a purchase
price and an amount of at least one income payment due to the annuitant
at the start date, the one of the purchase price and the amount of at
least one income payment due the annuitant including a fee for an annuity
reset feature that resets at least one variable of the annuity at a reset
date later than the first date if the at least one variable of the
annuity at the reset date is more beneficial to the annuitant than at
least the first date; and offering the annuity with the reset feature to
the annuitant.

2. The method of claim 1, wherein the reset feature is provided as an
optional rider to the annuity.

3. The method of claim 1, wherein the reset feature resets the at least
one variable of the annuity periodically if the at least one variable of
the annuity at a later periodic reset date is more beneficial to the
annuitant than at a previous reset date.

4. The method of claim 3, wherein the reset feature resets the at least
one variable of the annuity annually on an anniversary of the annuity.

5. The method of claim 1, wherein the at least one variable of the
annuity that is reset comprises the amount of the income payments due the
annuitant at the start date.

6. The method of claim 5, wherein the fee is applied to one or more
starting income payment.

7. The method of claim 1, wherein the annuity allows the annuitant to pay
the purchase price of the annuity at any time and in any amount up until
the start date, the method further comprising determining an amount of at
least one income payment due the annuitant at a date later than the first
date based on an amount and a frequency of premium payments made by the
annuitant.

8. The method of claim 1, comprising: issuing the annuity with the reset
feature; determining at a reset date whether at least one variable of the
annuity is more beneficial to the annuitant than at least the first date;
and resetting at least one variable of the annuity to the at more
beneficial at least one variable of the annuity.

9. The method of claim 8, wherein the variable of the annuity comprises
an amount of the income payments due the annuitant at the start date and
wherein determining whether the at least one variable of the annuity is
more beneficial to the annuitant comprises recalculating the amount of
the income payment due the annuitant at the start date based on an age of
the annuitant at the reset date and a remaining term of a deferral period
associated with the annuity at the reset date.

10. A method for providing a deferred annuity comprising: receiving
annuity information for an annuitant, the annuity providing annual income
payments to the annuitant for a term beginning at a start date;
determining at a first date, with a computing device, one of a purchase
price and an amount of at least one income payment due to the annuitant
at the start date, the one of the purchase price and the amount of the at
least one income payment due the annuitant including a fee for an annuity
reset feature that resets annually at a reset date later than the first
date the amount of the at least one income payment due the annuitant at
the start date if the amount of the at least one income payment due the
annuitant computed at the reset date is greater than the amount of the
income payment due the annuitant computed at the first date or a previous
reset date; issuing the annuity with the reset feature; recalculating at
the reset date the amount of the income payments due the annuitant at the
start date based on an age of the annuitant at the reset date and a
remaining term of a deferral period associated with the annuity at the
reset date; and resetting the amount of the income payment due the
annuitant at the start date when the recalculated amount is greater than
the amount of the income payment due the annuitant computed at the first
date or a previous reset date.

11. A system for providing a deferred annuity, the system comprising at
least one computing device having software associated therewith that when
executed causes the at least one computing device to perform a method
comprising: receiving annuity information for an annuitant, the annuity
providing periodic income payments to the annuitant for a term beginning
at a start date; determining at a first date, with a computing device,
one of a purchase price and an amount of at least one income payment due
to the annuitant at the start date, the one of the purchase price and the
amount of at least one income payment due the annuitant including a fee
for an annuity reset feature that resets at least one variable of the
annuity at a reset date later than the first date if the at least one
variable of the annuity at the reset date is more beneficial to the
annuitant than at least the first date; and offering the annuity with the
reset feature to the annuitant.

12. The system of claim 11, wherein the reset feature is provided as an
optional rider to the annuity.

13. The system of claim 11, wherein the reset feature resets the at least
one variable of the annuity periodically if the at least one variable of
the annuity at the later periodic reset date is more beneficial to the
annuitant than at a previous reset date.

14. The system of claim 13, wherein the reset features resets the at
least one variable of the annuity annually on an anniversary of the
annuity.

15. The system of claim 11, wherein the at least one variable of the
annuity that is reset comprises the amount of the income payments due the
annuitant at the start date.

16. The system of claim 15, wherein the fee is applied to one or more
starting income payment.

17. The system of claim 11, wherein the annuity allows the annuitant to
pay the purchase price of the annuity at any time and in any amount up
until the start date, the method further comprising determining an amount
of at least one income payment due the annuitant at a date later than the
first date based on an amount and a frequency of premium payments made by
the annuitant.

18. The system of claim 11, the method further comprising: issuing the
annuity with the reset feature; determining at a reset date whether at
least one variable of the annuity is more beneficial to the annuitant
than at least the first date; and resetting at least one variable of the
annuity to the at more beneficial at least one variable of the annuity.

19. The system of claim 18, wherein the variable of the annuity comprises
an amount of the income payments due the annuitant at the start date and
wherein determining whether the at least one variable of the annuity is
more beneficial to the annuitant comprises recalculating the amount of
the income payment due the annuitant at the start date based on an age of
the annuitant at the reset date and a remaining term of a deferral period
associated with the annuity at the reset date.

20. The system of claim 19, the amount of the income payment due the
annuitant at the start date further computed based on at least one of
mortality data, interest rates, and a replacement cost at the reset date.

Description:

RELATED APPLICATIONS

[0001] The present application is related to the following commonly owned
U.S. patent applications:

[0003] U.S. patent application Ser. No. 13/045,305, entitled "System And
Method For Providing Income Payments To An Investor", filed on Mar. 10,
2011, and assigned Attorney Docket No. 118-047, the disclosures of which
are hereby incorporated by reference in their entirety.

BACKGROUND OF THE INVENTION

[0004] The present application relates to methods and systems for
providing deferred annuities and other insurance products.

[0005] Annuities are generally contracts or products that provide income
or other payments for a fixed or variable period of time in exchange for
one or more premium payments. Annuities generally have two distinct
phases: the accumulation phase and the annuity or income phase. During
the accumulation phase, the annuitant pays a premium, which may be in the
form of a lump sum premium or a series of premium payments. During the
income phase, the insurance company or any other provider of the annuity
makes income payments to the annuitant for the stated term of the annuity
contract, e.g., for a fixed term or for the life of the annuitant. The
income payments may begin immediately or may be deferred for a stated
period of time. The amount of the income payment will generally vary
based on, among other things, the amount of the premium payment, the
amount of time that income payments are deferred, the duration of the
income payments, mortality rates and other actuarial data, and the
interest rate.

[0006] As attractive as annuities may be, annuities have drawbacks that
may make them less desirable investment options for some individuals. For
example, for a fixed rate deferred annuity the interest rate is locked in
at the time the annuity is purchased. When interest rates are relatively
low, potential purchasers may be disincentivized to purchase annuities at
the thought of locking in their income payments using a low interest
rate. Conversely, potential purchasers may expect interest rates to
increase at a later date and thus pursue other investments rather than
annuities. Similarly, potential purchases may not want to be locked into
other variables that factor into the calculation of their income
payments, figuring those may possibly change in the interim as well.

[0007] Accordingly, there is a need for methods for providing annuities
and annuity options that are not so limited and that avoid or minimize
these problems.

SUMMARY OF THE INVENTION

[0008] Accordingly, a method and corresponding system for providing a
deferred annuity are described herein that solve some or all of the
problems identified above. In some aspects of the invention, the method
includes receiving annuity information for an annuitant, the annuity
providing periodic income payments to the annuitant for a term beginning
at a start date, and determining at a first date, with a computing
device, one of a purchase price and an amount of at least one income
payment due to the annuitant at the start date, the one of the purchase
price and the amount of at least one income payment due the annuitant
including a fee for an annuity reset feature that resets at least one
variable of the annuity at a reset date later than the first date if the
at least one variable of the annuity at the reset date is more beneficial
to the annuitant than at least the first date. The annuity is offered
with the reset feature to the annuitant. In at least one embodiment, the
reset feature is provided as an optional rider to the annuity.

[0009] In at least one embodiment, the reset feature resets the at least
one variable of the annuity periodically if the at least one variable of
the annuity at a later periodic reset date is more beneficial to the
annuitant than at a previous reset date. In at least one embodiment, the
reset feature resets the at least one variable of the annuity annually on
an anniversary of the annuity.

[0010] In at least one embodiment, the at least one variable of the
annuity that is reset comprises the amount of the income payments due the
annuitant at the start date. The income payment amounts may be reset by
applying the then current interest rate at the time of the reset if such
interest rate is higher than it had been at the first time.

[0011] In at least one embodiment, the fee is applied to one or more
starting income payments.

[0012] In at least one embodiment, the annuity allows the annuitant to pay
the purchase price of the annuity at any time and in any amount up until
the start date, the method further comprising determining an amount of at
least one income payment due the annuitant at a date later than the first
date based on an amount and a frequency of premium payments made by the
annuitant.

[0013] In at least one embodiment, the method further includes issuing the
annuity with the reset feature, determining at a reset date whether at
least one variable of the annuity is more beneficial to the annuitant
than at least the first date, and resetting at least one variable of the
annuity to the at more beneficial at least one variable of the annuity.

[0014] In at least one embodiment, the variable of the annuity comprises
an amount of the income payments due the annuitant at the start date and
wherein determining whether the at least one variable of the annuity is
more beneficial to the annuitant comprises recalculating the amount of
the income payment due the annuitant at the start date based on an age of
the annuitant at the reset date and a remaining term of a deferral period
associated with the annuity at the reset date.

[0015] In at least one embodiment, a method and a corresponding system is
provided that includes receiving annuity information for an annuitant,
the annuity providing annual income payments to the annuitant for a term
beginning at a start date, and determining at a first date, with a
computing device, one of a purchase price and an amount of at least one
income payment due to the annuitant at the start date, the one of the
purchase price and the amount of the at least one income payment due the
annuitant including a fee for an annuity reset feature that resets
annually at a reset date later than the first date the amount of the at
least one income payment due the annuitant at the start date if the
amount of the at least one income payment due the annuitant computed at
the reset date is greater than the amount of the income payment due the
annuitant computed at the first date or a previous reset date. The
annuity with the reset feature is then issued. At the reset date, the
amount of the income payments due the annuitant at the start date is
recalculated based on an age of the annuitant at the reset date and a
remaining term of a deferral period associated with the annuity at the
reset date. The amount of the income payment due the annuitant at the
start date is reset when the recalculated amount is greater than the
amount of the income payment due the annuitant computed at the first date
or a previous reset date.

[0016] Additional aspects of the present invention will be apparent in
view of the description that follows.

BRIEF DESCRIPTION OF THE FIGURES

[0017] FIG. 1 is a flow diagram of a method for providing deferred
annuities with an income reset according to at least one embodiment of
the methods disclosed herein;

[0018] FIG. 2A is a flow diagram of a method for administering a deferred
annuity with an income reset according to at least one embodiment of the
methods disclosed herein;

[0019] FIG. 2B is a flow diagram of a method for administering a plurality
of deferred annuities with an income reset according to other embodiments
of the methods disclosed herein; and

[0020] FIG. 3 is a block diagram of a system for providing deferred
annuities with an income reset feature according to at least one
embodiment of the systems disclosed herein.

DETAILED DESCRIPTION OF THE INVENTION

[0021] The present application generally provides systems and methods for
providing deferred income or other types of annuities with an income
reset feature. This feature may be included with the annuity or may be
provided as an optional rider with the annuity. The income reset feature
is generally paid for with a fee that may be in the form of a one or more
reduced income payments or an explicit fee. Although the methods and
systems disclosed herein may be discussed by way of example primarily
with regard to certain types of annuities, such as deferred income
annuities, it is understood that the income reset feature discussed
herein may be applied to other types of annuities, including immediate,
fixed rate and/or term, variable rate, for the life of the annuitant,
etc. Moreover, even though the methods and systems are discussed as
having an income reset feature, other variables may be reset as well,
including the interest rate, mortality data, etc.

[0022] Generally, deferred income annuities are contracts under which
income payments are made to an annuitant beginning at an income start
date, for a defined period of time, in exchange for a purchase price or a
premium. The income start date may be set at a certain number of years
after then annuitant purchases the annuity or when the annuitant achieves
a certain age. The period of time that income payments may be made to the
annuitant may be a fixed number of periodic payments, such as for 1, 2,
3, . . . , 10 annual income payments, or an uncertain number of periodic
payments, such as annual payments for the life of the annuitant. The
purchase price may be paid by the annuitant in a lump sum or in a series
of periodic premium payments.

[0023] The amount and the frequency of the premium payments may be fixed
at the time the annuity is purchased. Alternatively, the annuity may
provide the annuitant the opportunity or the flexibility to make periodic
premium payments at any time and/or in any amount up until the income
start date. For example, the annuity may have a purchase price associated
therewith that the annuitant should pay prior to the income start date.
In this respect, the annuitant may make premium payments at his or her
choosing until the income start date. Since the amount and the timing of
the payments are uncertain, the amount of the income payment may be also
uncertain. In this instance, the amount of the income payment may be
computed periodically as the annuitant makes premium payments and/or at
the income start date based on the amount and the timing of the premium
payments that the annuitant actually made. The annuitant may desire a
certain income payment at the income payment start date. In this
instance, the amount of premium that must be paid to achieve the desired
income payment may also be computed periodically and communicated to the
annuitant.

[0024] In at least one embodiment, the deferred income annuity is provided
with an income reset feature. The reset feature specifically addresses
the concern that some individuals have of purchasing an annuity that
locks them into terms at the time of purchase that may be less beneficial
than terms available at a later time. The income reset feature, whether
included in the annuity or added to the annuity as a rider, resets at a
later time the amount of the income payment due at the income start date
should the variable or variables for computing the income payment be more
beneficial to the annuitant at the later time. As noted above, the reset
feature may reset any variable for computing the amount of the income
payment due at the income start date should any of the variables be more
beneficial to the annuitant at the later time. Therefore, if the annuity
provides flexibility with regard to the amount and the timing of the
premium payments to be made by the annuitant, then the variable or
variables used to compute the amount of the income payment themselves may
be reset. The income payment may be reset as a result of or based on a
change in any variable for computing the income payment due at a
particular income start date. For example, the income payment may be
reset based on a beneficial change in the replacement cost of the
annuity, or in publicly available data on mortality rates and/or interest
rates/yields.

[0025] It is understood that the specific details or requirements of the
reset may vary. For example, the reset may occur automatically when
certain conditions are met or when the annuitant specifically elects to
reset the amount of the income payments. There may also be limits on when
and to the extent that resets may be taken. For example, the reset may be
available at specific times, such as on an anniversary of the annuity
during the deferral period. Similarly, the number of resets that may be
taken may be limited, such as to one or more, fewer than all, or specific
ones of the anniversaries within the deferral period.

[0026] As an illustrative example, a 65-year old male may purchase a 10
year deferred income annuity for a $100,000 premium payment, which at
that time purchases $16,000 in annual income. At the first anniversary of
the annuity the income payment may be recalculated to determine if
changes in the applicable variables for computing the income payment
would result in a higher income payment at the given income start date.
In this instance, the annuitant at the first anniversary is 66 years old,
the premium payment is still $100,000, but the particular income start
date amounts to a 9 year deferral. Assuming that one or more of the
relevant variables, such as interest, mortality, etc., have changed such
that recalculation of the income payment at the first anniversary results
in a higher income payment of $16,050 per year, the annual income due the
annuitant at the income start date may be reset to the higher income
payment amount. The reset amount preferably serves as a floor for future
reset opportunities. For example, on the second anniversary of the
annuity the income payment may be recalculated based on the annuitant
being 67 years old and the annuity having an 8 year deferral period. In
this instance, the income may be reset only if the income payment
computed at the second anniversary is greater than the income payment
computed at the first anniversary.

[0027] Referring to FIG. 1, a method for providing deferred annuities with
an income reset feature according to at least one embodiment of the
methods disclosed herein begins at 102 by receiving from a potential
annuitant information relevant for issuing an annuity. The information
may include personal information, such as the annuitant's name, date of
birth, age, address, occupation, health issues or history, etc. The
information may also include annuity specific variables, such as whether
the annuitant is interested in purchasing a certain income or paying a
certain premium, the deferral period, etc. If the income reset feature is
provided as an optional feature, then a determination may be made at 104
as to whether the annuitant is interesting in purchasing the income reset
rider. If at 104 the income reset rider is not purchased, the purchase
price or the income payment may be determined at 106 based on the
information received without the cost of the income reset feature
factored into either the income payment or the purchase price. If,
however, at 104 the income reset rider is purchased or otherwise included
in the deferred income annuity, then the purchase price or the income
payment may be determined at 108 taking into account the cost of the
income reset feature. The purchase price and/or the amount of the income
payments are computed based on the value of the relevant variables at
that time, including mortality data for the particular annuitant, the
applicable interest rate, the amount of the deferral period, the desired
income payments and/or the purchase price, respectively, the amount and
the frequency of the premium payments, etc. As noted above, the fee for
the income reset feature may be an explicit fee or may be subtracted from
the income due at the start of income payments. In the first instance,
the purchase price calculated includes an additional charge for the
income reset feature. In the later instance, one or more of the starting
income payments are computed to include a charge for the income reset
feature. Once the premium and/or the payments are computed the annuity
may be offered to the annuitant and/or issued at 110.

[0028] It is understood that the fee for the variable reset option or
feature may be set as a constant per amount of annuity or may be computed
in a variety of ways. In at least one embodiment, the fee is computed
based on, among other factors known to those of skill in the art,
mortality data, length of the deferral period, interest rate expectations
going forward, and cost for hedging interest rate risks. As those of
actuarial skill will recognize, these factors may be used to compute the
current value of the risk that income payments will be increased during
the deferral period so that the fee for the variable reset option will,
across a group of customers, fully or partially offset the added cost of
providing the option to members of the group. The interest rate risk may
take into account, among other possible factors known to those of skill
in the art, the implied volatility of interest rates, volatility for
corporate bond spreads, and implied volatility of corporate bond spreads.
It is understood that various hedging instruments will have risks that
differ. For example, a AAA rated corporate bond will have less risk
associated therewith than with BBB rated corporate bonds. The cost of the
option attributed to the risk will therefore vary based on the type and
quality of the hedging instrument.

[0029] Referring to FIG. 2A, once the annuitant purchases the annuity and
the annuity issues, the provider of the annuity monitors the annuity
during the deferral period at 202. The type and the extent of the
monitoring will vary depending on the terms/limitations of the annuity
and the reset feature. In one embodiment, monitoring includes determining
at 204 if sufficient time has passed between the purchase of the annuity
and/or a previous income reset. For example, if the income reset feature
is available annually at the anniversary of the annuity, then the
provider determines if the then current date is an anniversary of the
annuity.

[0030] When the income reset is available, the provider of the annuity may
recalculate or otherwise determine with the system the amount of the
income due to the annuitant at the start date, taking into account the
changes in the variables for computing the amount of the income payment
at that given time. The variables for computing the income payment may
include the premium paid or the total premium to be paid, the amount of
the time remaining in the deferral period, the age of the annuitant, the
replacement value of the annuity under those circumstances, the
applicable interest rate or yield, mortality data, etc., at that given
time. The provider generally determines the amount of income due at the
start date by retrieving at 206 the amount of the income payment
determined previously from a database storing such values. The provider
then calculates the income payment amount under the then current
conditions at 208. If at 210 the current income payment or any of the
variables is determined to be greater than or otherwise more beneficial
to the annuitant than the prior income payment or variable, then the
prior income payment may be reset at 212 to the current income payment or
the more beneficial variable. The reset income payment amount or reset
variable is then stored in the database as the new current income payment
amount at 214. Otherwise, the prior income payment or the previously set
variable or variables remain the same. The system determines at 216
whether income payments are due to start before the next reset and
generally repeats the steps discussed herein for each subsequent reset
until the income payment or other variable for the particular annuity
being monitored can no longer be reset and payments begin at 218.

[0031] Referring to FIG. 2B, the system may be operable to administer
annuities having additional limitations with regard to the reset. For
example, there may be a limit on the number of income payment resets that
may be applied to any given annuity, which limit may be preset by the
annuity provider to help make the risks more predictable and manageable
and to more accurately price the charge for the fee for the variable
reset option as described above. Also, the resets may be limited to occur
only during the deferral period or may be available after income payments
have begun. In this instance, the provider of the annuity monitors
annuities it has provided at 230. In one embodiment, the system monitors
at least one annuity to determine if it is time for a reset and continue
monitoring the annuity or annuities until such time as a reset is
available. If at 232 it is determined that the reset is available, the
system may determine if any other conditions to the reset have been
satisfied. For example, if there is a limit on the number of resets
available, the system may at 234 determine if the limit on the number of
available resets has been reached.

[0032] When the reset is available, the provider thereafter determines the
amount of income due to the annuitant at the start date by retrieving at
236 the amount of the income payment determined previously. Resets may be
available after the deferral period and different rules may be applicable
for resets occurring during the deferral period than those occurring
after the deferral period. In this instance, the system may at 238
determine whether income payments have started and thereafter apply the
appropriate rules based on whether income payments have begun. For
instance, during the deferral period the system may calculate the income
payment amount under the then current conditions at 240 and after the
deferral period calculate the income payment amount under the then
current conditions with an adjustment to account for cost of living
restrictions on increases at 242. In either instance, the system
determines at 244 if the then current income payment or any of the
variables, with or without adjustments, is greater than or more
beneficial to the annuitant than the prior income payment or variable,
and resets the prior income payment at 246 to the then current income
payment or to the more beneficial variable accordingly and stores such
new current income payment amount in the annuity database. The system
generally repeats the steps discussed herein for each subsequent reset
and for each annuity being monitored.

[0033] Referring to FIG. 3, a system for providing deferred annuities with
an income reset feature is provided that includes at least one computing
device 302 having a processor and associated computer memory, a display
device, and an input device. The computing device 302 may be may a
personal computer or special purpose computer having software associated
therewith that when executed performs or assist in performing the methods
disclosed herein, including the steps of providing deferred annuities
with an income payment or other variable reset feature and administering
such annuities. The computing device 302 may also be coupled over a
communication network 306, such as a local area network (LAN), a wide
area network (WAN), the Internet, the World Wide Web (WWW), a wireless
network, or a combination thereof, to at least one server 304. The
software may therefore be installed locally at the computing device 302,
remotely at the server 304, or a combination thereof. For example, the
client device 304 may include a browser application that accesses and
displays for a user a web interface that includes therein form elements,
such as text boxes, radio buttons, drop down lists, etc., for the user to
input information relevant to provide the annuities disclosed therein.
The web interface may further include one or more buttons that when
selected cause the information provided therein to be communicated to the
server 308. Upon receipt of the information, server 308 may compute the
variables of the annuity, such as the purchase price and/or the amount of
the income payment, based on the information provided and other
variables, such as mortality data, interest rates, etc., stored on a
database 308. When the terms of the annuity are accepted, the information
associated with the annuity, including the annuitant's personal
information, the annuity specific information, such as the purchase date,
the deferral period, the amount and the frequency of premium payments
made or to be made, the amount of the income payments due and/or any
variables for computing the amount of the income payment, the start date
for the income payments, etc., are stored in the database or databases to
administer the annuity as disclosed herein.

[0034] While the foregoing invention has been described in some detail for
purposes of clarity and understanding, it will be appreciated by one
skilled in the art, from a reading of the disclosure that various changes
in form and detail can be made without departing from the true scope of
the invention.